Prosperity Watch: In tough budget times, vital local government jobs in rural counties at risk

North Carolina’s total unemployment rate is showing small but steady improvement, but the employment gains are not shared equally by all communities in the state. Progress made in this uneven recovery continues to pass over many rural and low-wealth communities, where unemployment remains persistently high and job growth is stagnant – or, in some cases, negative.

At the same time, in many of these communities, local revenues have not made significant gains since the official economic recovery was declared in June 2010, and subsequently, local budgets remain tight. Since local governments function as sizeable employers in their counties—and not just as providers of public services—tight budgets can have a significant impact on a county’s jobs picture[1], and do so in ways that vary from county to county across the state.

Overall, according to the Quarterly Census of Employment and Wages, County and city governments in the state employed 434,156 workers in 2010 – 11.5 percent of the state’s total workforce. In the state’s 20 most populous counties, the size of the local government workforce in relation to the total county labor market varies greatly, ranging from just 5.7 percent of the total Durham County workforce to 19.8 percent in Cabarrus County.

As the following map indicates, the story is dramatically different in the state’s rural counties, however. Local governments in rural counties employ 16.7 percent of the total workforce, a significantly greater share of the county’s workforce than the average of 11.3 percent in urban counties. In the most rural counties, local governments employ as many as one out of every three workers. The extreme in North Carolina is found in Swain County, where local government employed almost half the county’s entire workforce – 47.1 percent – in 2010. But in general, the share of local government employment in rural North Carolina counties falls within 10 to 20 percent of total county workforce. As a result, it is clear that rural counties are especially dependent on local government to employ large portions of their workforce, leaving the workers in these counties particularly vulnerable to public sector layoffs in times of tight budgets.

As local governments have struggled to balance their budgets amidst decreased support from both state and federal government, many have had to pursue cost-saving measures they would not have considered in the past, including layoffs[2]. In 2010, 50 out of 92 North Carolina counties responding to a budget and tax survey[3] reported having eliminated employee positions in response to budget shortfalls, and 20 counties reported laying off existing employees.

A recent BTC report[4] shows that budget shortfalls place a particular burden on rural counties, since they have lower median incomes and lower assessed property values than more populous counties, making it more difficult for those counties to raise revenue. Rural counties are also considerably more dependent on state and federal revenues to fund governmental operations than higher-wealth urban counties, making them more susceptible to budget shortfalls resulting from decreased support at higher levels of government on either the revenue or expenditure side.

Given the disproportionately greater role played by local governments in rural counties’ workforces, the economic and social impact of cutting local-government employment is consequently more damaging in low-income rural communities. Local-government workers in North Carolina earned $16.7 billion in wage income in 2010. If local governments cut jobs in response to budget pressures, it will drive up local unemployment and further strain county budgets as those who have lost their livelihoods turn to public assistance to mitigate their economic hardship. It will also resound through local economies, as laid-off workers will have fewer dollars to spend at businesses in their communities.